Modern technology has made doing business internationally so much easier.
Ease of travel, content management systems, instant messaging, video conferencing and several other advancements have made it so much easier to get clients throughout the world.
But figuring out the best way to collect payments from your international clients can still be stressful. Calculating exchange rates and communicating with partners in different time zones is not always easy.
Here are some of the options available for you to receive the foreign payments you are owed:
Wire transfers are a popular method used across the world to send money internationally.
These transfers use wire networks that essentially act as the messenger between the banks in an electronic money-sending transaction. A wire transfer requires a considerable amount of research and trust between the two payer and the payee. Unfortunately, this type of transfer can take a while.
For some payments – once the sender has gathered all your bank details – a trip to the bank is necessary. Then, they will have to fill out all the necessary paperwork.
Once a wire transfer has been sent it typically takes about 3 business days to be processed. However, it is not uncommon for it take as long as 5 business days. Occasionally it can even take a few weeks, and while that’s not commonplace it is not infrequent either.
You’ll also need to make sure that the payer’s bank, from which they are sending you money, has the capability to send the funds in your desired currency.
Exchange rates with wire transfers can be costly. There can be hidden charges for you to receive the money you are owed too. Sometimes the recipient may be subjected to a fee by the receiving bank. These fees are never disclosed upfront.
They can become a bone of contention between you and the recipient who expects to receive the full amount invoiced, net of any fees.
Irrevocable Letter of Credit
An irrevocable letter of credit is a guarantee from a bank, issued in the form of a letter. This commercial document is issued by a bank, at your client’s request, in your favor. Once the document has been issued, it cannot be modified without both parties’ consent.
ILOCs are most commonly used to facilitate international trade because of the additional risk involved when two parties unfamiliar with each other are transacting business across national borders.
Ultimately, what it means is that the bank must pay you even if your customer defaults. This is provided that the documents presented are in complete compliance with the language of the letter of credit.
While this may sound very safe and secure, there are some downsides.
If you plan on obtaining a letter of credit, you will need to talk with your bank – probably with somebody in the international trade department. This can be rather time consuming, but if you try to craft a letter of credit yourself, you could end up getting yourself in a lot of bother.
Remember, the language and phrasing in the documents is crucial. If not done by an experienced professional, you could end up being burned due to an unforeseen loophole you inadvertently created yourself!
If any detail is off, you risk an expensive legal battle, potentially in a country with laws that you are not familiar with. You could also easily end up not getting paid for shipments you’ve send.
For sellers, it’s probably best to look at alternatives to letters of credit.
The Best Option? Use an MSB
An MSB is a Money Service Business – and using one is the best way to send and receive funds internationally (as well as domestically). One such MSB would be us here at REMITR.
For receiving payments- from anywhere in the world- there is no better way than using REMITR Collect. Once you register for REMITR Collect, you will receive a free REMITR Collect Account.
Receiving payments into this Collect Account is completely free! Good riddance receiving fees.
This Remitr Collect Account allows you to collect payments in either Euro or US Dollars.
You only pay a small flat fee of $5/€5 to withdraw the funds into your local bank account, wherever in the world it may be. Users have the ability to withdraw funds from their Collect Account into their local bank account at any time they wish. Funds are transferred to your local bank account within 1 business day of submitting your online withdrawal request.
REMITR is accessible 24/7, thus eliminating the excuse of customers who are using distance and time zones are an acceptable reason to delay your payments. Our platform is a 100% secure, FINTRAC-registered service that employs state of the art technology to protect your payments and financial information.
Sick and tired of paying hefty receiving fees? Of waiting around to access your money?
If you’re in need of a payment method you can really trust, get in touch with REMITR today.